A Self-Liquidating Line of Credit Is Best Illustrated by Borrowing

question 37

Multiple Choice

A self-liquidating line of credit is best illustrated by borrowing:

• A) a smaller amount each time a loan is drawn against the credit line.
• B) to purchase inventory and repaying when payment for the sale of that inventory is received.
• C) only when funds are currently available to repay the loan in full.
• D)additional funds only when the loan balance is lower than it was the last time an amount was borrowed.

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Definitions:

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, calculating the present value of all cash flows associated with the investment.